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Focus Story

Next Generation labour, and building regulations—that affect decision-making AI AND AUTOMATION REQUIRE UPSKILLING &
across all enterprises. For instance, Indian factory owners often
RESKILLING WORKERS TO MAXIMISE INDIA'S
forgo up to 69 per cent of their industrial plots due to
DEMOGRAPHIC ADVANTAGE
outdated setback norms, incurring millions in opportunity
Reforms costs and lost employment potential. These are not mere As Artificial Intelligence and automation begin to alter the
administrative nuisances—they are binding constraints on
India’s growth.
contours of employment and productivity, the private sector
must also shoulder the responsibility for preparing the
As espoused in the Economic Survey 2024-25, the principle of
Required for “minimum necessary, maximum feasible” should guide all workforce. This includes participating in curriculum design,
robust on-the-job training, and enabling apprenticeships. The
regulation going forward. Indian businesses—especially
Indian labour force cannot be left to fend for itself against
MSMEs—must be enabled to allocate their limited managerial
these disruptions alone. Deployment of capital must be
bandwidth towards growth and innovation, not compliance
sensitive to the needs of India’s demographic, ensuring it is
Leapfrogging paperwork. Likewise, legal safeguards around punitive actions harnessed rather than squandered. The depth and range of
must be codified to ensure transparency, fairness, and the
deployment of technology is a decision to be made by business
minimisation of discretionary power. Deregulation must not be
leaders and not technologists.
misconstrued as the removal of all rules, but as a recalibration
of the regulatory burden keeping in mind the state capacity for
India’s Growth enforcement and the legitimate growth aspirations of India’s economic destiny will not be charted in isolation from
entrepreneurs.
global developments—but it will be determined by the resolve
with which we reform ourselves. Change in business practices
However, reforms are neither the sole prerogative nor the sole
lengthening our horizons. Kinship and network societies are
responsibility of public authorities. For India to achieve its and policymaking requires broadening our minds and
development goals, reforms of mind-sets and practices must good for social cohesion but they are not scale-friendly
happen in the private sector too. The private sector must also because trust does not travel beyond communities. Hence,
demonstrate its commitment towards Indian society – one both commercial practices and compliance policies are
premised on low trust and low sanctity of contracts. That has
I n a world fraught with uncertainty, fragmentation, and shifting that is based on trust, integrity and long term value creation. to change for the country to leapfrog to the next level of
They must realise that Corporate Social Responsibility is not
global economic alignments, India stands at a critical juncture.
The global trading order, once predicated on integration and distinct from Corporate Responsibility to the Consumer. development.
the free flow of goods, capital, and people, now teeters on the Worrying trends such as the increasing sale of junk foods, the By unleashing the economic freedom of its people, reimagining
edge of reversal. Geo-economic fragmentation is no longer a promotion of online betting platforms, and quality lapses in the role of the state from regulator to enabler, and a socially
theoretical risk but a lived reality. India, however, has the The first wave of structural reforms—from the Goods and sectors such as pharmaceuticals and food safety need to be responsible private sector, India can emerge as a model for
opportunity not merely to weather this storm, but to leapfrog Services Tax to the Insolvency and Bankruptcy Code—laid the arrested. A physically and mentally healthy young population inclusive, sustainable and sustained development
into a higher growth trajectory through the next generation of foundation for a unified, resilient economic architecture. These serves the need for quality labour in the private sector. Hence,
reforms—rooted in domestic empowerment, deregulation, and reforms, alongside the India Stack, have brought transparency, it will not be an act of charity but self-interest on the part of
a steadfast belief in the creative potential of its people and formalisation, and an unprecedented leap in digital public the private sector not to undermine the health of India’s youth
enterprises. infrastructure. Yet, the burdens of compliance, inspection, and
licensing remain disproportionately high for micro, small and with its products and services. This calls for looking beyond
The aspiration to become a Viksit Bharat by 2047, coinciding medium enterprises (MSMEs), which are the backbone of short-term gains and broadening the private sector’s ambition
to match the scale of the nation’s development aspirations.
with the centenary of our independence, demands a consistent employment and innovation. The cost of regulation, particularly
growth rate of 8 per cent in real terms over the next two for smaller firms, often outweighs the benefits of formalisation, A deeper social compact with Indian society also requires
decades. Achieving this is not only desirable—it is essential. But leading many to remain outside the system and thereby reflection on labour practices and wage structures. Competing
given the increasingly unfavourable global context, forgoing access to institutional finance, skilled talent, and on cost efficiency must not come at the cost of fair wages and
the answer lies not in waiting for a benign integration into formal supply chains. worker dignity. In the medium to long run, both goals are
external environment, but in intensifying our consistent with one another. Furthermore, building a healthy
reliance on internal engines of growth. FUTURE REFORMS SHOULD REDUCE THE COST, and productive Mittelstand will also require larger enterprises
TIME, AND UNCERTAINTY OF DOING BUSINESS to play a mentoring role, enabling knowledge transfer, market
This means enhancing economic freedom, IN INDIA BY DEREGULATING FACTOR MARKETS linkages, and access to working capital. This ecosystem-wide
dismantling regulatory constraints, and view of value creation, one that transcends balance sheets and
enabling enterprise at the grassroots. India quarterly targets, is the cornerstone of sustainable capitalism.
must now decisively transition from reforms The next generation of reforms ought to be about liberating
aimed at formalisation and digitisation to those this latent entrepreneurial energy. The goal must be clear: to
centred on systemic deregulation and the reduce the cost, time, and uncertainty of doing business in
promotion of investment efficiency. India. This requires a paradigm shift from a mindset of
Otherwise, India risks being control to one of facilitation. The focus must be on
trapped at low-middle income deregulating factor markets—especially land,
levels in the coming years.

Dr. V. Anantha Nageswaran, Chief Economic
Advisor to the Government of India

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